Report: Fiscal Reform and the Finance Law of 2017

October 31st 2016,
CSID Headquarters, Montplaisir

The Center for the Study of Islam and Democracy organized a conference on fiscal reform and the 2017 finance law, on October 31st at CSID HQs. This conference comes in the context of the Center’s responsibility in contributing to the success of the economic path in Tunisia.

Mr. Radwan Masmoudi started the conference with a welcoming speech stressing the necessity of the success of democratic transition which is linked to economic success and growth through identifying the nature of the problems and specifying the challenges that need to be lifted.

Mr. Elyes Fakhfakh initiated his intervention by dividing fiscality, which represents the main income of the state, to a direct tool that covers taxes on wages and companies in addition to the indirect taxes which are called blind fiscality. Furthermore, he indicated that the Ministry of Finance conducted a study in 2012 revealing that from 120.000 companies in Tunisia only around 60.000 are actually active. 60% of the later do not pay taxes given all the fiscal privileges they enjoy from the state and only 16% of companies are actually paying taxes. Mr. Fakhfakh pointed out that the fiscal injustice oppresses the citizen and impeded the performance of fiscality in Tunisia. Equally, the former Minister of Finance announced that the Ministry of Finance worked on reforming fiscality by organizing 200 workshops in the span of 6 months in which all national and political parties have contributed from May 2013 to October of the same year. This reform called to the following reforms: decreasing the list of beneficiaries from the evaluative system of fiscality, limiting currency exchange ceiling, imposing a 10% tax on exporting company, etc.

However, this reform campaign was stopped considering that the succession of governments that came to power gave little priority and short time to this reform project. This led this campaign to remain unfinished which should have required 5 years as a mid-term for implementation. He indicated as well that indebtedness arised to 63% in 2016 in comparison to 45% in 2013. This increase is a result of many factors: the dollar value influence on Tunisian dinar, the commercial deficit and indebtedness with a 10% increase yearly. As a consequence, this led Tunisia to take from the investment budget to cover all the state’s expenses which led to a deficit of 5.7%. In conjunction with the foregoing, the lack of trust and the absence of the feeling of citizenship require politicians and economists to enter a phase of transparency to rebuild this trust.

In the same context, Mr. Riadh Betaïeb, former Minister of Investment and International Cooperation, enumerated the objectives that require the speed of execution and they are the following: a need to reform the public fiscal system, attracting foreign investment, diversification of the state’s resources, reinvigorating the reform programs with regional partners, controlling indebtedness, deficit and expenditure indicators and rationalizing them. Additionally, pushing the engine of growth which is investment, exportation and consumption and helping active companies that are considered the state’s main capital. He indicated as well that there is a fiscal gap between the exporting companies and local ones resulting in a clear deficiency which enjoins the state with an additional responsibility of taking care of local companies to achieve fiscal equality.

The foregoing has to be taken into account considering that most foreign companies are not coming to Tunisia because they are looking for an adequate investment atmosphere and a normal security situation and a manageable working class. Mr. Riyadh called for a review and an evaluation of the fiscal privileges of companies considering that the last evaluation dates back to 2012. In this vein, these statistics proved that 90% of companies considered that fiscal privileges were not specified in the investment law. In his last remarks, Mr. Riadh Betaïeb stressed the need to coordinate the Finance law of 2017 with the politics of reforms and the requirements of the period. Equally, he considers that talking about the budget and resolving economic problems requires a method of consultancy in order to achieve a successful economic transition.

Mr. Hichem Ben Fadhl, a financial expert from “Afek Tounes” Party, started by enumerating the problems that led to the economic deadlock that Tunisia is experiencing: indebtedness is about 62%, fiscal pressure reached 23%, lack of liquidity for the country and the financial sector, and absence of trust between the governed and the governor. Mr. Ben Fadhl called for a liberalization of the economy and limiting the role of the state to questions such as supporting social funds and applying law on whoever violates it. He equally indicated that the 2017 Finance Law stated only 54 financial and economic measures while both of these reached 360 since 2011. So how will the state push its citizens to implement the law?

In the discussion, the participants’ enthusiasm was clear. One participant blamed the consecutive governments on their absence of coordination between their respective administrations in completing the reforms. Another one denounced the slackness of the state and not opening important files such as Super Markets and the invisible and informal economies. One of the attendees also stressed on the fact that problem lies in not acting according to objectives. In other words, it is necessary to rationalize the political economy and to establish organizing mechanisms that befit the grand objectives. And another one shed light on the funding channels based on an outdated system which is responsible for what we are living today.

In addressing the issues raised during the debate, Mr. Ben Fadhl stressed the need to clarify the economic program to the current government and a search for a balance in state’s revenues and expenditures. Mr. Bettaïeb insisted on the need to build a Tunisian national strategy to develop the economy and to implement reforms programs based on equality, accounting, monitoring and evaluation. Mr. Fakhfakh concluded the conference by answering the participants’ questions by focusing on rebuilding trust between the governor; characterized by a leading trustworthy figure and the citizens; the governed . He considered that postponing municipal elections is one of the reasons that delayed the regain of trust on the local level.

About CSID

The Center for the Study of Islam & Democracy (CSID) is a non-profit organization, based in Washington DC, dedicated to studying Islamic and democratic political thought and merging them into a modern Islamic democratic discourse. more details